Why Mobile Home Park Investing is the New Trend in Real Estate

David Moore: Hello, once again, David Moore with Mark Illsley of CBRE. So, when I was taught about investing, basically I had to answer three questions for this guy. Actually, he said I could ask him a question three times if I didn’t remember the answer after that, he wasn’t going to answer again, I had to go figure it out. But he also said, Hey, you know what, and I give him a hard time these days because I say, well, Ron, you can only ask me three times. But the other thing he always said, you answer three questions. What am I going to make? How am I going to make it? When am I going to make it? And you think about the product that you specialize in.

David Moore: And really, we’re talking from an ownership perspective of the park as the investor, but also if you just look at the ability to maybe fix some of the housing problems we’ve got. Our governor said 38,000 new homes in this year. And the permits may be issued, but they’re not being built.

Well, why aren’t they being built? Interest rates, cost materials, inflation, all the other stuff. So, if you look at a park and you go back to those three questions, what are you going to make? How are you going to make it? When are you going to make it? If you look at mobile home parks, typically, what’s the trend? If you look at sort of the beginning of mobile home parks, you had small parks… Or not a small park, you might add a small park, but you had smaller houses in them too. And then you went to double-wides.

But I was just thinking as we’re sitting here talking, the whole trend towards tiny homes and you think what happens if you took a double wide park and converted it to single-wides and you’ve increased your density effectively, right? So, what do you see happening with parks and how are people effectively increasing their ROI on these things, the opportunities, and obviously the institutional investors are going to have a different game plan than somebody like you or me going in to buy something.

Mark Illsley: Right. Well, institutions are focused I think on new development in the communities, in states that are allowing new manufactured home communities. There is a conference and it was revealed that some communities, one of our clients is currently in a development process of 16,000 units around certain parts of the United States total. And some of those are replacing units that they lost in the hurricane down in Florida, but that’s kind of where they’re going. And they…

David Moore: So, Mark, can I interrupt you real quick? So, when you’re talking about them doing, they own the park but they’re populating the park too, or are they putting the houses in and somebody buys them or they are just operating as the owner operator of that rental unit?

Mark Illsley: Traditionally, they will build out the infrastructure and then they will bring in manufactured homes from a manufacturer because they don’t manufacture, and then they will sell those units. Now, there are some institutions that are going to be putting in the manufactured homes and renting those units. And so, it all depends on their cost of money, it depends on the community if they allow it. Those are some of the issues that they’re dealing with. Where people can make money is if they are buying some of the older, really older manufactured home communities. And basically, they were trailer parks. And I remember my great-grandmother retired and lived in a small trailer and there was a bed in the back, a little bathroom, a little kitchenette, and then just a little sofa couch that all four of us kids would sit in when we went to visit her.

Mark Illsley: But it was all she could afford. And that’s where I think we’re kind of coming back to maybe some of these developments for smaller houses for retirees. There was a study that was done that showed that 42% of baby boomers had less than $50,000. And this is a few years ago, less than $50,000 of cash and equities and whatever to retire on. So, all of their retirement was either in social security or it was in the equity of their home. And so, there’s a big market, 80 million people that are, some of that population has to find a cheaper alternative place to live. And so, RVs are fitting that bill. They’re cheaper than manufactured homes. You can get a lot of them used. There are thousands of them that are used only on weekends.

So, there’s some good value, and people are trying to find places to put those and live there for extended periods of time. The issue is a lot of RV parks were not given approval to have full term or long term tenants. Some of them were approved to have 30 day stays, some 60, 90. There’s some that get around it, but the RV parks have not been designed for that. So, some of the older mobile home parks are taking their spaces. And when you have a manufactured home that cannot be lived in anymore, then they’re removing those at a significant cost to some communities and putting in RVs.

David Moore: So, what was the initial intent with the limitation on stay? The duration of stay?

Mark Illsley: That the RV parks were given zoning for our recreation purposes and to bring people to come into these communities, stay in those for long weeks, maybe for a month, boost up the economy. But those particular properties weren’t necessarily developed for residential purposes.

David Moore: Interesting.

Mark Illsley: And now because of the economy and because of baby boomers and others affordable housing issues, the people who are living in RVs, trailers, recreational vehicles, kind of back to the ’50s and early ’60s, like a lot of retirees or people who needed affordable housing were doing. So, we’re kind of going back to where we were.

David Moore: Well, and it’s sort of funny, when you came in this morning, we were talking a little bit about the prime real estate that a lot of these parks lie on.

Mark Illsley: Yes.

David Moore: And so, I can see that RV usage definitely being something would be very attractive. If you just look at the places that we discussed in Southern California on the beach or up here just on the Columbia River, Christ across from Vancouver, you got beautiful waterfront there and big old mobile home park. And Santa Cruz was the same way where I grew up. You had beachfront RV parks. And I started laughing because you made the comment. Well, nobody wanted that property at that point in time.

Mark Illsley: At that time that they were developing them. That’s right. They didn’t.

David Moore: Funny how that changes.

Mark Illsley: Yeah. And…

David Moore: So, let’s find something that nobody wants today and the it next great thing. ‘Cause the ocean, obviously that secret’s out as its lakefront.

Mark Illsley: Yes.

David Moore: Any waterfront. Any waterfront.

Mark Illsley: Any waterfront.

David Moore: Yep. Well, thank you once again, we’re going to sign off for a second. We’ll be right back with you, David Moore and Mark Illsley.